Is Flipping Houses For You?

​The first thing you should ask yourself before you continue on with the FlipperForce Academy or make your first flip purchase is why.

​Knowing your why is an important first step in figuring out how to achieve your goals, create a business you love, and create a life you enjoy living.  Once you know your ‘why’ will you find the courage to take the risks necessary to get started flipping houses and stay motivated to achieve your goals.

Flipping houses requires a person with an entrepreneurial spirit, a strong work ethic, courage and an appetite for risk.  You need to have a passion for real estate, remodeling & a strong 'why', because if you don't you will get burnt-out quick.

Flipping houses requires a number of different skill sets and experiences including financial analysis, real estate, real estate law, real estate sales, architecture/interior design, construction, project management, and accounting.

Although you do not need any formal education to flip houses, any experience with these topics will help build a strong educational foundation to become a successful flipper.

While experiences in these fields are helpful, it's more important to be able to identify your own strengths weaknesses and build an experienced house flipping team that you can help you learn, grow & scale your business.

Your team will act as your mentors and teachers along the way.  If you have a question about a contract, call your attorney and ask them a question.  If you have a question about construction, walk through the property with your contractor and ask questions about the construction process, methods and materials.

Throughout your first flip you will have many questions, problems and issues and your team will be an invaluable educational resource to help you learn along the way.

Buying real estate is expensive.  According to Zillow, the median house price is $346,000, and real estate is obviously much more expensive in urban markets on the East & West Coasts.  When you account for other costly expenses as buying costs, holding costs & repair costs you could easily need over $400,000 in capital to rehab a property.

The short answer is you use OPM (Other People's Money).

‍If you don't have the money to buy a flip property by yourself, you will need to use OPM to help you buy the property & pay for the project expenses.  You can use other people's money by utilizing lenders, business partners, friends or family that have the money to fund your rehab projects.

Even if you are utilizing OPM's money, a lender will generally require some sort of down payment (generally 20 to 30% of the loan value).  On a $300,000 purchase, the down payment could be close to $60,000 to $90,000.  

So in order to flip houses with absolutely no money, you will have to utilize creative financing strategies and utilize multiple funding sources to get 100% financing for your projects.

For example, you could use a Hard Money Lender for the purchase price, and utilize your business partners funds for the repair costs & on-going holding costs.

In a later article, we will learn about different sources of Funding for Flipping Houses and Creative Financing Options to use little to no money flipping houses.

Another option to consider If you don't have cash or don't want to take on debt is to partner with another local investor, friend or family member that can provide the funds to fund the deals.

If you don't have any rich friends or uncles to partner with you could also as a protege for a local house flipper that could mentor you and help you get your feet wet flipping houses.  Go to local investor Real Estate Association Meetings or Meetups and network with other house flippers and investors in your area.  Ask them if they need any help and offer your assistance as a 'non-paid' intern.  

If you don't have any money to get into rehabbing, you may also want to consider a strategy called wholesaling which requires little money upfront.  In wholesaling, you are getting a property under contract at a discount, and then re-assigning the contract to another buyer for a small premium.  

With wholesaling, you re-assign the contract before your take possession so you never need the funds to purchase or rehab the property.  You will only need a $500 to $1,000 Earnest Money Deposit and potentially a few thousand dollars for Transactional Funding.

The average profit a rehabber makes on a rehab project is around 10 to 20% of the After Repair Value, but it varies depending on the project and the market.

A 10% profit would be on the lower end, and a 20% profit would be considered a 'home-run' by most rehabber's standards.

So for example, if a property's After Repair Value (Resale Value) is $250,000 a rehabber should expect to make between $25,000 to $50,000.​

​In a later article, we will learn How to Analyze House Flipping Deals & Calculate your Rehab Profit.

Flipping houses is a risky business and you can absolutely lose money on a flip project if you don't know what you are doing.  (here is a full list of different ways you can lose money on a rehab project).

A typical rehab project (3 bedrooms, 2 baths) with all new kitchens, bathrooms & finishes throughout can take 2 to 3 months to complete the repairs.

Once you finish the rehab, you also need to consider the time it takes to sell the property.  In a hot market, you might be able to get an offer accepted within the first week, but it could take a few weeks or months in a bad market.

​Once you get an accepted offer, it generally takes 45 to 60 days for the real estate/loan paperwork to process and to hand over the keys to the end buyer.

In a best case scenario, you could rehab and resell a property in 2 months.  If the rehab project has contractor issues and the repairs get delayed or you have trouble selling the property it could easily take more than 6 months.

In our Project Management Lessons, we discuss How to Create a Project Schedule for your Rehab Projects

Every successful flipper in our industry started as a newbie just like you, but they took the time to invest in their education and had the courage to take the risks necessary to get started flipping houses.

Successful flippers have a strong 'why' that motivates them and empowers them to achieve their goals.

Successful flippers have the flipper mindset, that embodies an entrepreneurial spirit, a strong work ethic, and a passion for real estate and remodeling.​

Successful flippers don't let excuses such as 'I don't have any experience,' 'I don't have any money' prevent them from getting started and chasing their dreams.

As a new flipper, you need to decide if you have what it takes to be a successful house flipper.  If you think you have what it takes, please proceed to the next Lesson....